Accounting Ch.10 Multiple Choice

Which of the following accounts is not reported in the stockholders' equity section of the balance sheet? Treasury Stock. Common Stock. Sales Revenue. Retained Earnings.

Which of the following stages of equity financing comes last in the traditional order of progression? Investment by friends and family of the founders. Investment by the founders of the business. Initial public offering (IPO). Outside investment by "angel" investors and venture capital firms.

In terms of total sales, assets, and earnings, the dominant form of business organization is the: Sole proprietorship. Partnership. Corporation. Limited liability company (LLC).

Common stockholders usually have all of the following rights except: To receive dividends when declared. To share in the distribution of assets. To elect board of directors. To participate in the day-to-day operations.

Which of the following is a reason that a corporation would prefer to issue stock instead of bonds? Dividend payments can be deducted for income tax purposes but interest payments cannot. Expansion is accomplished without surrendering ownership control. The risk of going bankrupt is less. All of these.

Which of the following statements regarding the corporate form of business is correct? The disadvantages are that generating capital is difficult and that owners have limited liability. Disadvantages are that the business is subject to government regulations and double taxation on its income. One disadvantage is that ownership is easy to transfer. All of these.

Issued stock refers to the number of shares: Outstanding plus treasury shares. Authorized. In the hand of stockholders. That may be issued under state law.

Outstanding common stock refers to the total number of shares: Issued. Issued plus treasury stock. Issued less treasury stock. Authorized.

The par value of shares issued is normally recorded in the: Additional Paid-in Capital account. Common Stock account. Retained Earnings account. Treasury Stock account.

When a company issues 25,000 shares of $1 par value common stock for $10 per share, the journal entry for this issuance would include: A debit to Cash for $25,000. A debit to Additional Paid-in Capital for $25,000. A credit to Common Stock for $250,000. A credit to Additional Paid-in Capital for $225,000.

Jade Jewelers issued 15,000 shares of $1 par value stock for $20 per share. What is true about the journal entry to record the issuance? Credit Common Stock $300,000. Credit Cash $300,000. Credit Common Stock $15,000. Debit Additional Paid-In Capital $285,000.

South Beach Apparel issued 10,000 shares of $1 par value stock for $5 per share. What is true about the journal entry to record the issuance? Debit Common Stock $10,000. Credit Cash $50,000. Credit Common Stock $50,000. Credit Additional Paid-In Capital $40,000.

Hayes Corporation issues 100 shares of its $1 par value common stock for $15 per share. The entry to record the issuance will not include a: Debit to Cash $1,500. Credit to Additional Paid-In Capital $1,400. Credit to Common Stock of $100. All of these.

Preferred stock is called preferred because it usually has two preferences over common stock. These preferences relate to: Dividends and voting rights. Par value and dividends. The preemptive right and voting rights. Dividends and distribution of assets if the corporation is dissolved.

Which of the following is not a potential feature of preferred stock? Convertible. Redeemable. Cumulative. They all are potential features of preferred stock.

California Adventures issues 5,000 shares of 8%, $100 par value preferred stock at the beginning of 2014. All remaining shares are common stock. The company was not able to pay dividends in 2014, but plans to pay dividends of $100,000 in 2015. Assuming the preferred stock is cumulative, how much of the $100,000 dividend will be paid to preferred stockholders and how much will be paid to common stockholders in 2015? $40,000 to preferred stockholders and $60,000 to common stockholders. $80,000 to preferred stockholders and $20,000 to common stockholders. $20,000 to preferred stockholders and $80,000 to common stockholders. $100,000 to preferred stockholders and $0 to common stockholders.

California Adventures issues 5,000 shares of 8%, $100 par value preferred stock at the beginning of 2014. All remaining shares are common stock. The company was not able to pay dividends in 2014, but plans to pay dividends of $100,000 in 2015. Assuming the preferred stock is noncumulative, how much of the $100,000 dividend will be paid to preferred stockholders and how much will be paid to common stockholders in 2015? $40,000 to preferred stockholders and $60,000 to common stockholders. $80,000 to preferred stockholders and $20,000 to common stockholders. $20,000 to preferred stockholders and $80,000 to common stockholders. $100,000 to preferred stockholders and $0 to common stockholders.

Treasury Stock is normally reported as: A reduction of total stockholders' equity. An asset account. A liability account. An expense account.

When treasury stock is purchased, what is the effect on total stockholders' equity? Decrease. Increase. No effect. Cannot tell from the given information.

When shares of another corporation are purchased, what is the effect on total stockholders' equity? Decrease. Increase. No effect. Cannot tell from the given information.

When treasury stock is purchased, what is the effect on assets and stockholders' equity? Assets and stockholders' equity increase. Assets and stockholders' equity decrease. Assets increase and stockholders' equity decrease. Assets decrease and stockholders' equity increase.

Which of the following statements about treasury stock transactions is true? Treasury stock is recorded as an asset by the acquiring company. Only losses on the sale of treasury stock are recorded on the income statement. Stockholders' equity is reduced when treasury stock is purchased. Gains and losses on the sale of treasury stock are recorded on the income statement.

Which of the following is TRUE regarding the accounting for treasury stock? Treasury stock is reported on the balance sheet in the equity section. The purchase and sale of treasury stock has no impact on the income statement. Treasury stock represents a negative equity account. All of these.

When treasury stock is resold at a gain, the difference between its cost and the cash received when resold: Increases net income. Increases stockholders' equity. Has no effect on net income or stockholders' equity. Increases net income but decreases stockholders' equity.

On December 2, Coley Corp. reacquired 1,000 shares of its $2 par value common stock for $27 each. On December 20, Coley Corp. reissued 400 shares for $15 each. Which of the following is correct regarding the journal entry for the reissued shares? Debit Cash $15,000. Credit Treasury Stock $10,800. Credit Paid in Capital - Treasury Stock $5,200. Credit Treasury Stock $6,000.

The Retained Earnings balance reported on the balance sheet typically is not affected by: Net income. Net loss. Dividends paid. Stock splits.

Both cash dividends and stock dividends: Reduce total assets. Reduce total liabilities. Reduce total stockholders' equity. Reduce retained earnings.

The Common Stock account on a company's balance sheet is measured as: The number of common shares outstanding x the stock's par value per share. The number of common shares outstanding x the stock's current market value per share. The number of common shares issued x the stock's par value per share. The number of common shares issued x the stock's current market value per share.

How does the stockholders' equity section in the balance sheet differ from the statement of stockholders' equity? The stockholders' equity section is more detailed than the statement of stockholders' equity. The stockholders' equity section shows balances at a point in time, whereas the statement of stockholders' equity shows activity over a period of time. The stockholders' equity section shows activity over a period of time, whereas the statement of stockholders' equity is at a point time. There are no differences between them.

Clothing Emporium was organized on January 1, 2015. The firm was authorized to issue 100,000 shares of $5 par value common stock. During 2015, Clothing Emporium had the following transactions relating to shareholders' equity: Issued 30,000 shares of common stock at $7 per share. Issued 20,000 shares of common stock at $8 per share. Reported a net income of $100,000. Paid dividends of $50,000. What is the total stockholders' equity at the end of 2015? $420,000. $370,000. $470,000. $250,000.

Clothing Emporium was organized on January 1, 2015. The firm was authorized to issue 100,000 shares of $5 par value common stock. During 2015, Clothing Emporium had the following transactions relating to shareholders' equity: Issued 30,000 shares of common stock at $7 per share. Issued 20,000 shares of common stock at $8 per share. Reported a net income of $100,000. Paid dividends of $50,000. What is the total amount recorded in the Common Stock account at the end of 2015? $420,000. $370,000. $470,000. $250,000.

Clothing Emporium was organized on January 1, 2015. The firm was authorized to issue 100,000 shares of $5 par value common stock. During 2015, Clothing Emporium had the following transactions relating to shareholders' equity: Issued 30,000 shares of common stock at $7 per share. Issued 20,000 shares of common stock at $8 per share. Reported a net income of $100,000. Paid dividends of $50,000. What is total paid-in capital at the end of 2015? $420,000. $370,000. $470,000. $320,000.

Roberto Designers was organized on January 1, 2015. The firm was authorized to issue 100,000 shares of $5 par value common stock. During 2015, Roberto had the following transactions relating to stockholders' equity: Issued 10,000 shares of common stock at $7 per share. Issued 20,000 shares of common stock at $8 per share. Reported a net income of $100,000. Paid dividends of $50,000. Purchased 3,000 shares of treasury stock at $10 (part of the 20,000 shares issued at $8). What is total stockholders' equity at the end of 2015? $270,000. $300,000. $250,000. $200,000.